Alpha beta T cells respond to complexes of peptide antigen and MHC molecules. The way in which protein antigens are transformed into peptides suitable for such binding and the intracellular pathways followed by MHC molecules both before and after peptide association are critical to our understanding of T cell immunity. We have used normal and gene transfected cells to examine the issues. Class II molecules are efficiently assembled and transported in cells deficient in MHC class I molecule folding and stability due to an absence of peptide transporters in the ER membrane, indicating no absolute requirement for ER peptides or invariant chain in promoting initial class II dimer assembly and ER egress. However, these cells and other transfected fibroblasts are inefficient in exporting MHC class II out of the ER unless invariant chain is present. Only the lumenal and transmembrane portions of invariant chain are needed for this chaperone function, whereas the cytoplasmic tail of invariant chain is critical for guiding class II molecules to the endosomal pathway. Invariant chain has the capacity to alter the structure of early endosomes and change the rate of movement of endocytosed proteins through this early sorting compartment. Deletion of 10 residues in the invariant chain cytoplasmic tail retains the endosomal targeting capacity while eliminating the ability to modify early endosomes. In this case, invariant chain and class II enter late endosomes, and the invariant chain that accumulates here, in contrast to that in early endosomes, is cleaved in the lumenal region. Because Langerhans cells show what seem to be related changes in class II- invariant chain localization and endosomal structure concordant with alterations in the efficiency of peptide loading, we suggest that invariant chain and class II movement through the endosomal pathway is an event regulated by progressive proteolytic deletion of signals in invariant chain. This regulation may have a role in the normal physiological control of the efficiency of the class II processing pathway.